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Revenue shortfall threatens Healthy Forests initiative

12/26/2008

By Nathan RodriguezSPECIAL TO THE COLORADO STATESMAN

Almost eight years have passed since President George W. Bush signed the bipartisan No Child Left Behind Act into law. Most observers lauded the intent of the legislation, only to be disheartened when lack of funding made it powerless.

Last month, Colorado Gov. Bill Ritter announced the bipartisan Healthy Forests/Vibrant Communities Act of 2009, which, if passed, is designed to dramatically increase the state’s resources for combating wildfires and enhancing current prevention efforts. Environmental groups have praised the initiative, but some caution that certain provisions may go unfunded because of budget constraints.

“I view forest health and removing dead trees around where people live as a life and death matter,” he said. “Most experts say it’s not a matter of if but when we have one of these megafires that burns more than 500,000 acres.”

In all, the committee proposed seven bills for the upcoming legislative session, five of which will appear as stand-alone legislation, with the other two rolled into the omnibus bill.

The Healthy Forests Act adopted one program that subsidizes timber-harvesting companies to help clear 1.5 million acres of beetle-killed lodgepole pines, which wait to serve as kindling for the next wildfire.

Gibbs said the program is necessary because the timber companies must compete with the lucrative oil and gas industry when hiring personnel. Although the revolving loan program isn’t based on a pilot program, Gibbs said he thinks it will be welcomed.

“My phone has been ringing off the hook with people wanting to get involved in the timber industry in Colorado,” he said.

The interim committee also addressed community responses to wildfires.

Most Colorado communities already have response plans in place, but Rep. Christine Scanlan, D-Dillon, said they lack uniformity.

“Some are comprehensive and up to two or three hundred pages, while others may be just three or four pages long,” she said. “We’re trying to get more consistency, and make sure communities are asking the right questions. The plans vary wildly and often depend on the time and resources a community has in order to work.”

With timber removal and wildfire response plans now a priority in the Healthy Forests Initiative, it’s possible some remaining programs could be put on hold.

Last year, $13.8 million was diverted from projects in federal Region 2 — which encompasses Colorado, Kansas, Nebraska and most of South Dakota and Wyoming — and redirected to fight fires elsewhere, primarily in
California.

“To some extent, we’re subsidizing the fire protection for communities in California at the expense of communities in Colorado,” said Tony Cheng, director of the Colorado Forest Restoration Institute. He said funds are generally reimbursed, but not always. “It raises the question of whether these diversions hamper the long-term investments we need to make — and I would definitely argue that it has.”

The Healthy Forests Initiative would siphon $5.5 million from the oil and gas severance tax — assuming current revenue projections remain accurate.

However, severance tax revenues have fluctuated wildly in recent years, from $211 million in 2006 to just over $100 million in 2007. In June the state announced it expected $356.4 million in severance tax revenue for the upcoming fiscal year — a time when natural gas prices were at a high.

“We are concerned that the next forecast will be lower,” said Bill Levine, budget director of Colorado’s Department of Natural Resources. “I would say (expected and actual revenue) vary pretty wildly. The big one really is the price of natural gas.”

Over the last six months, the price of natural gas has hit new lows.

In September, Colorado ratcheted down its severance revenue projections to $313 million, and later this month, officials expect that figure to dip yet again, due in large part to the floundering natural gas industry.

“We’ve been downgrading our forecast for natural gas every month since September,” said Kobi Platt, an economist at the Energy Information Administration. “We just keep getting bad news on the demand side and there’s no place for the gas to go. But in addition to the lost revenue, there’s probably going to be less production overall.”

If that’s the case, and shrinking profit margins are coupled with a cutback in production, severance tax revenues could be substantially lower than projected.

Levine said there is a danger that programs in the DNR’s operational account, including the Healthy Forests Initiative, won’t be fully funded.

“The DNR gets half the severance tax, and those funds are split in half again, with one quarter of it devoted to water projects, and the remaining funds going into an operational account,” he said, noting the Legislature has tapped into the operational account in the past.

“When we talk about the General Assembly raiding the fund, the piece they focus on is the operational account,” he said. “The last time the economy really took a downturn, in ’02-’03, they made transfers from the severance tax fund to the general fund. But that’s totally up to the will of the Legislature.”

Ryan Bidwell, executive director of Colorado Wild, said despite the potential for a severance revenue shortfall, he agrees with the funding mechanism.

“It’s risky in the sense that there’s a lot of competing demands for those severance tax dollars. But, unfortunately, in the economic climate we have, that’s one of the few sources of revenue available,” he said. “So I understand why it’s the focus.

“Hopefully in the long-term we’ll find other avenues to fund this kind of work,” he said.

Gibbs said he’s prepared for a revenue shortage.

“If the funding is less than what the Department of Natural Resources is expecting, then there will be cuts for all of their projects I’d imagine, because obviously we have to balance the budget,” he said, noting that wildfire programs would be forced to compete for funding with species conservation and forest health projects.

And so it may turn out that, much like the well-intentioned No Child Left Behind Act of 2001, the Healthy Forests Initiative and other related wildfire legislation may be hampered by a lack of funding. The fate of the forests and the ability to whittle away at the residual wildfire risk rests on the Legislature.

“These things always have a price tag associated with them, so it’s just a matter of where an issue like this fits in with the prioritization of other policy issues, especially in a situation of fiscal constraints,” Cheng said.

“Wildfires are one of those things that require a constant investment over time. It’s not a problem you can solve with a quick infusion of cash in one or two years. It took us decades to get in the situation we’re in, and it’s going to take a while to properly deal with it.”